Gold Prices Headed Down Despite Ukraine, Middle East Conflicts

Gold bars
Gold prices always go up in times of investment trouble, but analysts say this year's rise won't last long. Reuters

Gold is always an appealing investment in times of trouble. And as the Middle East conflict intensifies and Russian-backed rebels continue their activities in Ukraine, the metal has had a great run in the past few months. But analysts say the popularity won’t last.

On Thursday gold was trading at $1,287 per ounce, down from a high of $1,350 earlier in July. 

“Gold is a cheap way of hedging against the economic risk, and it also does not hurt to hedge against violence in the Middle East and Eastern Europe,” Standard Life Investments Ltd. strategist Frances Hudson told Bloomberg.

However, “expectations of higher interest rates and strength in the equity market may dash all hopes of gold rising,” he added.

Gold-backed exchange-traded products saw outflows of $319 million in the first six months of this year, but took in $536.81 million in July, a 1 percent gain.

The metal usually turns on U.S. monetary decisions. For example, it hit a record price of $1,921.17 per ounce in 2011, as investors feared inflation and weakening currencies. When markets rallied in 2013, the price fell 28 percent as investors sold their gold exchange-traded products. But the price jumped back up again this year, after slow U.S. economic growth, emerging market selloffs and geopolitical turmoil.

Now prices are continuing to slip after the U.S. Federal Reserve announced that it would continue to scale back its monthly bond purchases. The news came just a few hours after a better-than-expected economic growth report.

“You have an economy on the mend,” Integrated Brokerage Services precious metals dealer Frank McGhee told the Wall Street Journal.

“If you get a good jobs report on Friday, you’ll see more of a sentiment in the market for ending stimulus faster or raising rates,” he added. 

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